AvalonBay

AvalonBay executives crowed to analysts about how much their were increasing rent

AvalonBay reported a nearly 10% increase in their lease rental rates. “Sean Breslin – COO: Moving to slide 7. Our strong Q3 revenue growth of 11.8% was primarily driven by higher lease rates, which increased 9.5% year-over-year, the reduced impact of concessions, which contributed 240 basis points and other more modest contributions from other rental revenue and underlying bad debt trends. As noted on the chart, rent relief was 140 basis-point headwind for the quarter as we recognized $5.7 million versus the $12.7 million from Q3 2021.” (AvalonBay Communities, Inc. Q3 2022 Earnings Call, 11/4/2022)

AvalonBay’s COO: “we realized a double-digit rent increase on the unit inventory we leased and occupied during the quarter.”  “Sean Breslin – COO: Turning to slide 8. Same-store trends during the quarter remained quite strong relative to historical norms. Starting with chart 1, turnover increased a little more than we anticipated as we pushed through healthy rent increases, but was still well below pre-pandemic levels. As a result of the increased turnover, physical occupancy ticked down to 96%, but remained roughly 20 basis points above our typical experience during the quarter. Additionally, as noted in the 2 charts at the bottom of the slide, while our availability increased relative to the last few quarters, we realized a double-digit rent increase on the unit inventory we leased and occupied during the quarter, a very favorable outcome that sets us up well for 2023.” (AvalonBay Communities, Inc. Q3 2022 Earnings Call, 11/4/2022)

AvalonBay’s COO saw “plenty of opportunity to benefit from renewal rent increases as leases expire throughout 2023.”  “Sean Breslin – COO: In addition to the baked-in revenue growth outlined in chart 1, our loss-to-lease is currently running at roughly 6% and is depicted in chart 2, providing plenty of opportunity to benefit from renewal rent increases as leases expire throughout 2023.” (AvalonBay Communities, Inc. Q3 2022 Earnings Call, 11/4/2022)

AvalonBay admitted it was seeing more move outs due to rent increases, calling it “not surprising”

AvalonBay’s COO: “we have some people that are moving out, as I just mentioned, due to rent increase. Given the numbers we’ve been pushing through, that’s not surprising”  “Sean Breslin – COO: Yes. No. Good question, Adam. I think the right way to think about it is the comment that I made earlier in that when you look at new move-ins in the third quarter, for this year compared to last year, the household income associated with those move-ins is up around 11%. And if you look at the move-in value associated with those move-ins, it was up about 10%. So these, basically, people are kind of trading at a consistent level from — if you think of it from a rent to income perspective. So, we have people moving in with that much higher income and our rents are up about that much. It sort of makes sense overall. Certainly, we have some people that are moving out, as I just mentioned, due to rent increase. Given the numbers we’ve been pushing through, that’s not surprising. But we continue to source demand that is comfortable paying what we are expecting and their incomes appear to support it.” (AvalonBay Communities, Inc. Q3 2022 Earnings Call, 11/4/2022)

AvalonBay talked up the end of eviction moratoriums, saying it was forcing out more tenants in response

AvalonBay saw a “tailwind” from the end of eviction moratoriums, as it was more able to force out tenants behind on rent.  “Sean Breslin – COO: Shifting to the bottom of the slide, chart 3, our collection rate from residence continues to improve. At the beginning of the year, bad debt was trending in the high 4% range but has declined by roughly 200 basis points as the years progressed. As eviction moratoria has expired and the courts are continuing to make progress processing new cases, we expect the overall downward trend to continue as we move into 2023, providing a tailwind for revenue growth. Of course, as indicated in chart 4, we’ll likely experience immaterial amounts of rent relief in 2023 as compared to the $35 million we’ve recognized in 2022, presenting a headwind for ‘23 revenue growth.” (AvalonBay Communities, Inc. Q3 2022 Earnings Call, 11/4/2022)

AvalonBay told analysts it was increasing evictions and seeing more moveouts in anticipation of court dates.  “Sean Breslin – COO: And then, the other piece that really is out there is I talked about the underlying bad debt trend improving, which is a function of a number of variables. One of those is more evictions as we move through the court process or people who are just skipping out because they know they’re getting to their court date. So, a little bit of a pickup there. Those are really the only two that had any kind of pickup in terms of reasons for move out. The others came down in terms of relocation, obviously came down as it relates to home and condo purchase as you might expect, things of that sort, all came down.” (AvalonBay Communities, Inc. Q3 2022 Earnings Call, 11/4/2022)